In the last 20 years Adam Smith has become the idol of people who claim that Karl Marx is ‘out of date’. The simple fact that Smith died 30 years before Marx was even born has never worried them. Nor has their own meagre knowledge of who he was and what he stood for.

In fact, Marx himself was a great admirer of Smith, seeing him as a trailblazer in understanding the workings of capitalism, and contrasting him with those who simply wanted to apologise for the ruling class, like Malthus, Say, Senior and the ‘vulgar economists’ who followed them. Smith, together with David Hume and Adam Ferguson, was part of the ‘Scottish Enlightenment’, a mid-18th century intellectual current that sought a rational understanding of the world and society along very similar lines to French thinkers like Diderot, Helvetius, Voltaire and Rousseau, with whom they corresponded and discussed.

What such thinkers did, in fact, was to identify the major features of the new, capitalist organisation of society which was emerging and contrast it with the ‘irrationality’ of the dying feudal order. This old order still held political power in France and had made last desperate attempts to reimpose itself on Scotland with the Stuart ‘Jacobite’ rebellions of 1715 and 1745. But they did more than just apologise for capitalism. They also began to lay the basis for a materialist and scientific explanation of all social phenomena.

So Smith’s friend Hume wrote scathing attacks on religious superstition, while Smith himself tried to use the model of Newton’s physics to develop a theory of morals and language. In the process he began to recognise that society was not some fixed thing governed by an ahistorical ‘human nature’, but changed as human beings changed the ways in which they made their livelihood.

But it was his economic writings which had the greatest impact. For in them he identified, as no one had before, the main features of the new capitalist form of economic organisation, pointing to measures which would accelerate its advance. As a pioneer he often made mistakes. He identified labour as the measure of value, suggesting that profit was a deduction from labour, laying the ground for the development of scientific political economy by Ricardo and Marx. But he then confused the output of labour with the wage paid to the labourer, so mixing with his labour theory of value a different theory in which profit and rent contributed to the creation of value.

What is more, writing at a time when industrial capitalism was only just beginning to take hold of society, Smith had little chance to grasp what a contradictory, crisis ridden system it would be. All that concerned him was that it was a much more dynamic and productive way of producing wealth than the remnants of feudalism it was replacing, and he wanted this replacement to happen as quickly as possible. So his ideas laid the basis for Ricardo and then, above all, Marx, to develop a fuller account of capitalism, but he himself could not possibly have produced one. That is why it is so intellectually dishonest for bodies like the Adam Smith Foundation today to claim he shows capitalism is a system without faults.

This book is a useful, but pedestrian, account of his life. It brings out the continuity between his ideas and those of other Enlightenment thinkers in France, Scotland and even occasionally England. It also shows how his ideas took shape against the background of the growth of capitalist business methods in Scotland and the reorganisation of the state after the defeat of the Jacobite uprisings. It was this which led to a larger opening for critical ideas in Scotland than in England – although the opening was shut just as firmly shortly after Smith’s death in 1790, when revolution in France sent a shiver of fear among new as well as old exploiters in Britain.

From that point onwards, the critical approach which characterised Smith became an increasing embarrassment to the class with which he had identified. Only opponents of capitalism could finish the work of the Enlightenment thinkers who had helped the system clear away the remnants of feudalism.